Today, I will be analyzing Miramont Resources Corp’s (CNSX:MONT) recent ownership structure, an important but not-so-popular subject among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine MONT’s ownership structure in more detail.Check out our latest analysis for Miramont Resources
Institutional OwnershipMONT’s 21.91% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. Although MONT has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. In the case of MONT, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into MONT’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipI find insiders are an important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. MONT insiders hold a significant stake of 17.63% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public OwnershipThe general public holds a substantial 60.46% stake in MONT, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only determining factor when you’re building an investment thesis for MONT. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Miramont Resources’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is MONT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.